Global Governance of Antitrust and the Need for a BRICS Joint Research Platform in Competition

72 Pages·2016·0.93 MB·English

by  Brigid Marriott

Centre for Law, Economics and Society
Research Paper Series: 5/2016
Global Governance of Antitrust and the
Need for a BRICS Joint Research Platform in
Competition Law and Policy
Ioannis Lianos
Centre for Law, Economics and Society

CLES
Faculty of Laws, UCL

Director: Professor Ioannis Lianos

CLES Research Paper Series
5/2016

Global Governance of Antitrust and the Need
for a BRICS Joint Research Platform in
Competition Law and Policy

Ioannis Lianos

August 2016

Centre for Law, Economics and Society (CLES)
Faculty of Laws, UCL London,
WC1H 0EG
The CLES Research Paper Series can be found at
www.ucl.ac.uk/cles/research-paper-series
All rights reserved.

No part of this paper may be reproduced in any form without permission of the
authors.

ISBN 978-1-910801-12-3
© Ioannis Lianos 2016
Centre for Law, Economics and Society
Faculty of Laws, UCL
London, WC1H 0EG
United Kingdom
Global Governance of Antitrust and the Need for a BRICS Joint Research
Platform in Competition Law and Policy

Ioannis Lianos

ABSTRACT
In May 2016 the BRICS competition authorities signed a Memorandum of
Understanding (MoU), which puts in place an Institutional Partnership between BRICS
jurisdictions in the area of competition law through a general framework for multilateral
cooperation. The paper takes stock of these recent developments and suggests the
establishment of a BRICS Joint Research Platform which, in addition to its task to
improve the quality of decision-making within BRICS’ competition authorities, will also
serve as an alternative forum in the constitution of a global deliberative space in the
area of competition law.
The paper offers a critical analysis of the call for policy convergence in
competition law, which merely emanates from the global business community and
enables established competition law regimes, such as that of the US and Europe, to
influence the convergence point and more generally to take ownership of the process
of global convergence of competition law.
The paper criticizes this state of affairs for not taking into account the different
patterns of diffusion of competition law and consequently the variety of competition
law systems emerging out of the original US antitrust law model and its EU competition
law “spin-off”. In particular, it castigates the lack of participation in this global
deliberative space of emergent and developing economies and the inability of various
affected interests, beyond global businesses and, to a limited extent, consumers, to
be considered. The study takes a broader perspective and puts forward a
“participation-centred” approach that would seek to avoid both majority and minority
biases, the ultimate objective being not policy convergence as such, but increasing
levels of total trust between competition authorities and between competition
authorities and their stakeholders. The BRICS Joint Research Platform may play an
important role in contributing to the establishment of this new architecture of global
governance of competition law.

Keywords: global competition law, policy convergence, trust, BRICS, global
governance

JEL: F02, F15, F42, F60, K21, L40, G34, O19, O55, Z18

1
Global Governance of Antitrust and the need for a BRICS Joint Research
Platform in Competition Law and Policy

Ioannis Lianos1

I. Introduction

While at the end of the 1970s only nine jurisdictions had a competition law, and
only six of them had a competition authority in place, in 2016 more than 120
jurisdictions around the world have adopted and effectively implemented competition
law2. During the same time we witnessed an increase in the activity of new competition
authorities, in the area of merger control but also beyond3. The more authorities are
involved in reviewing global merger transactions or are investigating global cartels, the
more the complexity of bilateral co-operation increases. It is frequent that the same
transaction will be reviewed by more than a dozen competition authorities around the
world. As a recent OECD report indicates:
“(t)he Co-operation Complexity Index for merger deals has increased by about
23 times from 1995 to 2011 […] The index can also be calculated for cartel
enforcement, as a function of the number of authorities involved and the
number of investigations with an international element. For international cartel
investigations, the Co-operation Complexity Index has increased by about 53
times between 1990-1994 and 2007-2011”4.
This proliferation of national competition laws sets important challenges for the global
governance of antitrust, by which concept I refer to the management of the risks
generated by the increased interconnectedness of cross-border enforcement of
competition law. An important risk involves the costs of “cross-jurisdictional
disagreement,” which, it is alleged, may create particularly complex situations for
international businesses5. These disagreements may also affect the effectiveness of
competition law enforcement, as it is increasingly more difficult for competition law
regimes to impose remedies that take into account the negative externalities imposed
by the specific anticompetitive conduct, not only to their own consumers, but also to
the consumers of other jurisdictions. For instance, a global merger may affect the
market of a handful of jurisdictions, each having the possibility to block it, in case of
course it has a sufficient size to affect the incentives of the merging firms. As no

1 Professor of Global Competition Law and Policy, Director, Centre for Law, Economics and Society,
UCL Faculty of Laws; Leading Researcher, Skolkovo-HSE Institute for Law and Development
(Moscow). The author would like to thank Frederic Jenny and Alexey Ivanov for helpful comments and
Matt Strader for efficient research assistance. The usual disclaimer applies.
2 OECD, Challenges of International Co-operation in Competition Law Enforcement (2014), available
at https://www.oecd.org/daf/competition/Challenges-Competition-Internat-Coop-2014.pdf .
3 Ibid.
4 Ibid., p. 28.
5 Ibid., p. 39.
2
jurisdiction controls more than 20% of the global GDP, it looks likely that if one
jurisdiction takes a decision on the basis of its domestic concerns, this may potentially
produce important externalities to the consumers of the other jurisdictions. It is also
clear that decisions to block or clear a merger are not “symmetrical”: for a global
merger to go through it needs the agreement of more than 4 or 5 jurisdictions, while
for a global merger to be blocked, the opposition of a significant jurisdiction in terms
of global GDP may be sufficient, the stricter substantive standard usually prevailing6.
A recent OECD report explains that while “(f)rom 1990 to 2011, […] the
complexity of co-operation has increased 20 times or more, the legal mechanisms for
co-operation have hardly evolved”7. This gap in the global governance of competition
law has led many to argue for a strategy of incremental policy convergence,
augmented by the elaboration of a number of global institutional mechanisms to
enhance cooperation among various jurisdictions in the area of competition law8. It is
clear that further international cooperation should be promoted, but one needs to
understand the practical limits of cooperation in the context of an increasingly more
complex institutional environment and conflicting approaches in matters of economic
policy, including competition law. It is also important to assess more critically the
“policy convergence” claim, as it might not be practically achievable and theoretically
appealing to strive for greater policy convergence in the area of competition law. A
critical analysis of the factors pushing for a greater diversification of competition law
regimes is therefore needed, before exploring the possibilities for global governance
of antitrust to tame the negative effects of such diversification and complexity.
The first part of the paper critically explores the claim for “policy convergence”
in this area and concludes that this is practically unachievable and normatively
contestable. The paper argues that the concept and mechanisms of “policy
convergence” should be replaced by a different conceptual framework for the global
governance of competition law that emphasises the establishment of higher levels of
trust between the different competition authorities, but also between the authorities
and the people (or stakeholders).
The second part of the paper explores the role of BRICS in the establishment
of an architecture of global governance in this area so that it corresponds better to the
dynamics of systemic transformation of the competition law enterprise and the
challenges posed by expanding global interdependence in this area. I argue for a more
intensive cooperation between BRICS jurisdictions in the area of competition law and
policy, the first step of that process being the recent establishment of a BRICS Joint

6 Ibid., p. 43.
7 Ibid., p. 53.
8 See, for instance, PEREZ MOTTA, Eduardo (2016), Competition Policy and Trade in the Global
Economy: Towards an Integrated Approach, The E15 Initiative, World Economic Forum, available at
http://e15initiative.org/publications/competition-policy-trade-global-economy-towards-integrated-
approach/ ; OECD, Challenges of International Co-operation in Competition Law Enforcement (2014),
available at https://www.oecd.org/daf/competition/Challenges-Competition-Internat-Coop-2014.pdf .
3
Research Platform. I consider that such cooperation may not only serve the interests
of the BRICS jurisdictions by enhancing the quality of their competition law
enforcement, but that it will also constitute a significant contribution to a more inclusive
and participation-centered model for the global governance of competition law and
policy.

II. Global Governance of Competition Law does not mean Global
Policy Convergence of Competition Law

Recent discussions over the need for an architecture of global governance in
competition law and policy have turned around the need to achieve policy
convergence and the various mechanisms that may be put in place so as to promote
international cooperation between competition authorities with the aim to reduce the
occurrence of conflicting outcomes when more than one competition law authority are
investigating the same competition law case. The “heterogeneity” of competition laws
is seen as a source of large costs for companies active in multiple foreign markets as
well as for the competition law authorities which are obliged to run multiple parallel
investigations. Although the narrative of policy convergence has been a factor driving
international cooperation in the area of competition law, the assumptions on which it
relies upon and its normative implications have not been examined in depth. It is
usually assumed that globalization of economic activity provides the legal irritant for
the development of competition law regimes worldwide with the aim to regulate the
negative externalities of global capitalism, in particular the exercise of market power
in transnational markets. From this perspective, the adoption of competition laws in
various jurisdictions is subject to similar principles of development, thus implying that
once the various competition law regimes reach a similar level of maturity they will
tend to converge as they will have to respond to a similar set of external stimuli (the
so called “absolutist view”)9.
I consider that such proposition is neither descriptively accurate nor normatively
appealing. First, although the various competition law regimes around the world
emanate from similar sources and represent to a certain extent a modified version of
the original model developed in the United States (US) during the late 19th century and
early 20th century, a closer look to the global diffusion of competition law in particular
the last three decades indicates that the different trajectories pursued by each
competition law regime establish complex relations of path dependence that cannot
be accounted for by the “absolutist view”. I explore an alternative theoretical

9 For such claim see, PRIEST, George, Competition Law in Developing Nations: The Absolutist View,
in (D. Sokol, T. Cheng & I. Lianos eds.) COMPETITION LAW AND DEVELOPMENT (Stanford
University press, 2013), p. 79 (advancing the view that there is an optimal competition law based on a
set of competition law principles for which there is widespread agreement and that despite the different
economic and cultural settings, the competition laws of all nations should in principle be identical. Any
deviation from this optimal competition law model should be adequately explained and accounted for).
4
framework, policy diffusion, which challenges the simple assumptions of the “policy
convergence” model and enables us to set the conceptual foundations of the global
governance of competition law on firmer theoretical and empirical ground. Second, I
explore the conceptual fuzziness of “policy convergence” and the implicit normative
assumptions made as to the desirable “convergence point”. This leads me to
underscore the profound incompatibility between the claims for “policy convergence”
and the multi-polar foundations of the global economy, as well as the legal pluralism
of the international legal order. I conclude this part by arguing for a different conception
of global governance in this area, which would aim to enhance trust between
competition authorities, but also between competition authorities and the people (their
stakeholders) at a transnational level.

A. The global diffusion of competition law

Policy diffusion has been defined as “the process whereby policy choices in
one unit are influenced by policy choices in other units”10. Policy transfer consists in a
form of policy diffusion and sometimes it is considered as a related concept11.
“Diffusion” has been described as “any process where prior adoption of a trait or
practice in a population alters the probability of adoption for remaining non-
adopters”12. By emphasizing the interdependence of the policy choices effectuated by
States, diffusion theory assumes that the outcome for each actor (here a State)
depends on the choices of all other actors with which they share some form of
interdependence (e.g. trade related, spatial interdependence, cultural,
communicational). Although a product of interdependence, diffusion does not lead to
similar outcomes across jurisdictions. The diffusion of competition law in different
political settings and legal traditions illustrates its great malleability and the operation
of various background factors.
One should therefore distinguish diffusion from convergence, as the former
concept pre-supposes the existence of interdependence, while convergence may be
caused by interdependence but also by different common factors, such as the fact that
the specific units may react to similar, independent pressures (e.g. globalization)13.

10 GRAHAM, Erin, SHIPAN, Charles R., VOLDEN, Craig, (2013) The Diffusion of Policy Diffusion
Research, British Journal of Political Science, 43(3), pp. 673-701.
11 MAGGETTI, Martino & GILARDI, Fabrizio, (2016) Problems (and solutions) in the measurement of
policy diffusion mechanisms, Journal of Public Policy, 36(1), pp. 87-107, 90 (noting that there is
“significant overlap” between policy transfer and policy diffusion).
12 STRANG, David (1991), Adding Social Structure to Diffusion Models – An Event History Framework,
Sociological Methods and Research, 19(3), pp. 324-353; HEINZ, Torben (2011), Mechanism-Based
Thinking on Policy Diffusion, No. 34 KFG Working Paper, Freie Universität Berlin; DOBBIN, Frank,
SIMMONS, Beth, GARRETT, Geoffrey (2007), The Global Diffusion of Public Policies: Social
Construction, Coercion, Competition, or Learning?, Annual Review of Sociology, 33, pp. 449-472.
13 MAGGETTI, Martino & GILARDI, Fabrizio, (2016) Problems (and solutions) in the measurement of
policy diffusion mechanisms, Journal of Public Policy, 36(1), pp. 87-107.
5
The diffusion of competition law, from the United States, where it was first
framed as a distinct legal field at the end of the 19th century, in different political
settings and legal traditions illustrates its great normative appeal and its conceptual
flexibility, as pretty much the same conceptual framework has been used in the various
jurisdictions adopting competition law. Despite this common core, the adoption and
effective implementation of competition law has been nevertheless characterized by a
great degree of variability among jurisdictions, notwithstanding the considerable role
played by international actors aiming to generate different mechanisms of policy
convergence (substantive and/or procedural): the ICN, UNCTAD, OECD, the EU and
other regional integration models and, the influence of common background factors,
such as the globalization of markets, the professionalization of economic advice, the
development of technocratic competition law enforcement.
This diversity is not only reflected in the adoption of different models of
competition law across various jurisdictions, but also in the way this area of law has
been effectively implemented. The implementation of competition law varies of course
within each jurisdiction through time and often depends on the specific institutions in
place, their capabilities, but also the policy area in which it is intervening (e.g. energy,
telecommunications, healthcare services, etc.). There might also be some dissonance
between the intended enforcement of competition law, as this is proclaimed in the
foundational texts, guidelines, legislation, constitutional (or other) provisions that have
been put it in place in each jurisdiction, and its day-to-day operation in the specific
jurisdiction.
Among the factors explaining the diversity of competition law systems in various
jurisdictions, the most important ones consist in the patterns of diffusion (that is, the
mechanisms of interdependence that lead to the adoption and implementation of a
specific policy by another State), and in more general background factors affecting the
interdependence among jurisdictions, such as the interaction of politics with
transnational expert communities, the relations between government and global or
transnational business, the important role of state capitalism and State Owned
Enterprises (SOEs) in global trade, the role of other societal groups (e.g. consumers,
labor unions) that are trans-nationally organized, and the role of domestic struggles of
power and influence when these reproduce relatively common (from a cultural
perspective) political/ideological or expertise-related struggles (“the
internationalization of palace wars”14).
Policy diffusion should be understood broadly as consisting of: (1) adoption,
and (2) implementation. Adoption refers to the formal introduction of the competition
law regime into the legal system. Implementation may be conceptualized as referring
to the stages after the decisional point of adoption and must be understood as referring

14 DEZALAY, Yves & GARTH, Brian (2002), The Internationalization of Palace Wars (The University of
Chicago Press, 2002).
6
to the “depth of adoption”. This includes the direct practical experience with
competition law indicated, among others, by the frequency of its use, its scope, the
quality of competition assessment, its role in the specific polity, its institutionalization
and permanence within a specific organizational structure, enduring through elections
and changes in government. The process of implementation of the competition law
regime into a specific organizational and institutional context is prolonged and has
several phases. It should not be excluded that the transplantation of competition law
in political and legal systems that do not present functional equivalents to the system
where the transplant originated may produce completely different outcomes, leading
to situations of diffusion without convergence.
Diffusion may be vertical, horizontal, or both. Vertical diffusion operates through
higher levels of governance, for example through the influence of international
organizations or the federal level, when exploring intra-state processes of diffusion.
The most important of the former are international organizations (OECD, UNCTAD,
EU), international networks (ICN), or regional economic integration organizations (e.g.
EU). Horizontal diffusion involves interconnectedness of governments when elites
communicate and interact, exchanging ideas, solutions, and experiences.
Focusing on diffusion as a product of interdependence, rather than on the
process of policy convergence as such, enables us to explore the reasons competition
law has been diffused across many jurisdictions and assess the influence of the
process of diffusion to its substantive and procedural framework, in comparison to the
original model of the Sherman Act and US antitrust law in general. One should
understand that there are different patterns of diffusion, indicating the existence of
various trajectories of this original “model” and the operation of various forms of
interdependence between the various units of analysis (in our case competition law
systems).
Diffusion literature has put forward the following typology of mechanisms
(patterns) of diffusion15:
 learning resulting from internal (e.g. the characteristics of public administration,
legal and constitutional frameworks, administrative culture) or external (e.g.
transnational institutional linkages, government decisional interdependence,
epistemic communities) sources;
 externalities, providing incentives altering the cost-benefit ratios of domestic
actors, such as competition among governments for resources (leading them
to adopt and implement similar “successful” policy innovations)16; coercion

15 HEINZ, Torben (2011), Mechanism-Based Thinking on Policy Diffusion, No. 34 KFG Working Paper,
Freie Universität Berlin. DE FRANCESCO, Fabrizio (2013), Transnational Policy Innovation: The OECD
and the Diffusion of Regulatory Impact Analysis, Colchester: ECPR Press; DOBBIN, Frank, SIMMONS,
Beth, GARRETT, Geoffrey (2007), The Global Diffusion of Public Policies: Social Construction,
Coercion, Competition, or Learning?, Annual Review of Sociology, 33, pp. 449-472.
16 MAGGETTI, Martino & GILARDI, Fabrizio, (2016) Problems (and solutions) in the measurement of
policy diffusion mechanisms, Journal of Public Policy, 36(1), pp. 87-107, 90 (noting that “success can
7